CAS Exam 7 Spring 2013, Question 10
Study guide: Exam 7
Given the following information ($000) as of December 31, 2012:
| Accident Year | Earned Risk Pure Premium | Adjusted Premium | Aggregate Reported Loss | Aggregate Loss Report Lag |
|---|---|---|---|---|
| 2010 | 9,200 | 9,200 | 3,600 | 70% |
| 2011 | 8,500 | 7,400 | 2,500 | 50% |
| 2012 | 10,000 | 10,000 | 4,200 | 30% |
Part a (1.5 points)
Use the Stanard-Bühlmann method to estimate the IBNR for accident years 2010 through 2012 combined.
Part b (2 points)
Use a credibility-weighted combination of the Stanard-Bühlmann and chain ladder estimates to calculate a total IBNR estimate for accident years 2010 through 2012 combined. Assume credibility is a linear function of the report lag with a credibility factor of 0.35.
Part c (0.5 points)
Briefly describe one advantage and one disadvantage of the Stanard-Bühlmann method as compared to the chain-ladder method.
Answer this question and see the worked solution